Shiller: US, European Stocks Overpriced

Stocks have roared up more than 83 percent from the lows of March 2009 but now are too high, says Robert Shiller, the Yale University professor who co-created the closely watched S&P/Case-Shiller Home Price Indices.

Stocks danced above 12,000 this week before settling back, a point not reach since June 2008 as the crisis began in earnest.

“I would say the market is overpriced based on fundamentals . . . I'm talking about the U.S. and probably Europe," Shiller told CNBC.

Regarding home sales, Shiller is probably the single most recognized expert on the subject alive today. Yet he himself professes utter ignorance about what might happen next.

December new home sales rose but 2010 ended with home sale down 14 percent, the lowest since the early 1960s. High unemployment and uncertainty over consumer debt haven't been able to overcome buyers’ doubts, despite mortgages rates around 5 percent.

Shiller said home prices could fall again, noting a generalized fear of a second U.S. Great Depression.

But Karl Case, the economist who co-founded the S&P/Case-Shiller index, said earlier this week that U.S. home prices have reached a bottom and may be set to rise in the first half as buyers take advantage of increased affordability.

“Prices have gone flat, bouncing around at what I think is essentially a bottom,” Case, a retired professor of economics at Wellesley College, said in a radio interview on “Bloomberg Surveillance.” “We’re really going to have to wait to see what the spring market brings.”

The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent in November from a year earlier, the biggest 12-month decrease since December 2009.

An abundance of inexpensive homes and an expanding economy will support housing demand as it enters the so-called spring selling season when the bulk of transactions typically occur, said Case.

“There are bargains out there,” said Case. Affordability will entice first-time buyers to jump into the market “if jobs are created at a pretty good clip,” he said.

Meanwhile, the U.S. Federal Reserve has kept its pledge to stay on the path of stimulus, leaving rates at zero to prop up what little spending is going on in the economy. Rates have been very low since December 2008.

Stocks have roared up more than 83 percent from the lows of March 2009 but now are too high, says Robert Shiller, the Yale University professor who co-created the closely watched S P/Case-Shiller Home Price Indices.
Stocks danced above 12,000 this week before settling...